Jan 2, 2009

India - Airfares cut

Full service carrier Kingfisher Airlines has decided to cut its basic fares up to 60 per cent. This announcement, which will mean around a 20 per cent cut in overall fares, follows competitor Jet Airways' and national carrier Air India's announcements to cut its basic fares at an average rate of 50 per cent and 40 per cent, respectively.

Low cost carriers SpiceJet and IndiGo have also announced special advance booking Rs 99 basic fares across all sectors today, while JetLite announced a cut of around 40 per cent across all sectors and special advance booking basic fares starting from as low as Rs 9.

Last week, Kingfisher had announced a range of fare cuts without exactly specifying the quantum of cuts across sectors.

While the fares have been marketed well and have led to a major response from the consumers, the airlines have smartly kept the artificial floor of fuel surcharges intact at Rs 2,500-3,000. The major onrush of the passengers actually led to one of the major Indian travel portal crashing day before yesterday.

“We have had to offer some lower fares since we saw February and March going really slow in terms of bookings. But after the lower fares were launched our overall bookings have gone up by around 70 per cent today compared to yesterday,” Sanjay Aggarwal, CEO of SpiceJet had said a day after they made the fare cut announcement.

ATF prices, which accounts for the single largest chunk of an airline’s costs have come down by more than 50 per cent compared to August prices. ATF currently accounts for less than 40 per cent of an airline’s costs, compared to 50 per cent around three months earlier. The civil aviation ministry has been in turn making repeated appeals to airlines to pass on the benefits of these cost cuts to passengers to stimulate air travel, which has seen a decline this year compared to last.